Q:I have been a renter for several years, and have decided that it is time to buy. I am looking for a condominium apartment, and have located several that interest me. I am a “babe in the woods” when it comes to real estate. What steps should I take to make sure that I am getting a good deal and that no one is taking advantage of me?

A: Let’s respond to the “good deal” question first, since this is – or should be – basic to everyone who is considering purchasing a place in which to live. Investors have made a lot of money on real estate over the years, although the economists will tell you that on average, the stock market has historically performed better than real estate.

However, if you plan on buying a home (which for this column includes a condominium unit or a cooperative apartment) in which to live, do not consider it as an investment. You want a place in which live, so that you will no longer have to deal with landlords or rent increases, and you want to take advantage of the tax advantages which are available to homebuyers and not to tenants. If the property goes up in value, more power to you – but that should not be your primary concern.

There is no guarantee that real estate will continue to escalate in value as it has been doing over these past few years. Just ask anyone who purchased at the peak of the real estate market in the late l980's. Many owners found that their mortgage was greater than the depreciated value of their house, and it was not until the mid-l990's that they were back in the black.

How would you feel if you purchased a condominium unit today for $275,000, obtained a mortgage for $247,500 (i.e. 90 percent loan to value), and suddenly your unit was only worth $245,000? Make no mistake: while I unconditionally encourage everyone to be a homeowner, it may not be your greatest investment. Having dampened your enthusiasm, let’s now turn to the other part of your question. What steps should you take when you buy a condominium unit? Here are some basic suggestions:

1. Don’t jump. Do not be pressured into buying, just because the seller or the real estate agent is telling you that there are many other interested parties in the wings. There are too many unhappy homeowners today who got caught up in the frenzy of the hot real estate market and acted with their emotions instead of their brains. When you find your dream house, give yourself at least 24 hours as a cooling-off period in which to reflect on whether you really want to buy this property. Unlike other consumer transactions, there is no legally mandated cooling off period when you buy a house. If you sign a real estate contract, that is a binding, legal document and the courts will enforce the terms of that contract if the matter is brought before the courts.

2. How much can you afford? If you do not pay your rent, your landlord can ultimately evict you. If you do not pay your mortgage (called a deed of trust in most areas), your lender can foreclose on you. Thus, you want to make absolutely sure that you can afford the property you are interested in. And the word “afford” does not only mean being able to come up with a deposit, but – more importantly – means that you will be able to handle the monthly mortgage payments. You clearly do not want to live without food or furniture, and thus you should attempt to make a realistic budget of what your income and expenses are. You should also arrange to meet with a mortgage lender, who will carefully review and analyze your financial situation and advise you of the maximum loan that will be available to you. Keep in mind that lenders have computerized formulas that can quickly compute these facts. There are also many similar programs available on the Internet.

3. Everything is negotiable. The normal home buying process goes like this. You – as potential buyer – make a written offer to the seller. The seller has three alternatives: he can accept, reject or counter your offer. The seller is not obligated to accept your offer; unless he is illegally discriminating against the buyer for religious, racial or other reasons protected by civil rights and human relations laws, he can reject your offer for any reason or no reason. If the seller reject your offer, you can either submit a new offer or walk away. If the seller counteroffers, you then have the same three alternatives (reject, accept, counter).

In order to have a valid real estate contract, there must be an offer, an acceptance and valuable consideration. If you have given money (called the earnest money deposit) with your offer, this completes the three requirements and you have a contract to buy your dream house.

4. Contingencies. The Courts will generally enforce a real estate contract. Thus, if you have entered into a contract which simply states that on October 15, 2002, you will buy the unit for $250,000, if you do not go to closing on that date, you will be in default and your seller may be able to keep your deposit or sue you.

But what if you can’t get a mortgage loan? What if the property has termites or other significant damage? What if the condominium association has no reserves and has a lot of owners who are delinquent in their monthly condo fees?

Unless you have built some contingencies into your contract, you are stuck – and you must go to closing.

Accordingly, your contract must contain a number of contingencies. This means that if any of these contingencies cannot be met, you will not be in breach of the contract and will have the right to terminate the contract, get your earnest money back and walk away from the deal.

Here are some of the most important contingencies that must be included in your sales contract: